Commissioners prepare to sue on Seven Falls

Published: Wednesday, January 16, 2013 at 4:08 p.m.

Last Modified: Wednesday, January 16, 2013 at 4:08 p.m.

Caught in a legal quagmire, commissioners voted Wednesday to sue the U.S. Army Corps of Engineers, the N.C. Division of Water Quality and lot owners in the failed Seven Falls subdivision if the parties can’t agree how the county should spend $6 million in bond proceeds.

The board authorized County Attorney Russ Burrell to invite the Corps, state DWQ officials and roughly 200 lot holders to a meeting in February, seeking an agreement on how the county should disburse $6 million it recovered from a performance bond forfeited by a developer.

“I won’t say I’m particularly sanguine about the possibility of that happening, but it could happen and I hope it will,” Burrell said about an agreement.

If those negotiations fail to produce progress within about 30 days, the board agreed the county has no other option than to sue those parties to force a federal judge to mandate how the $6 million should be spent.

“It sounds like a very good approach and I think it’s something we ought to pursue,” said Commissioner Grady Hawkins, referring to the carrot-and-stick approach of negotiation followed by legal action.

The county maintains the bond proceeds must be used to finish road, water and sewer infrastructure, along with associated erosion control, promised to lot owners by developer Keith Vinson. Burrell told the board that will likely cost more than $6 million at today’s prices.

But the U.S. Army Corps of Engineers, which revoked Vinson’s 2008 permits for altering streams and wetlands, wants the county to pay $800,000 in off-site stream work to mitigate damages. The Corps says the county can’t proceed on any work at Seven Falls until it’s paid and a new permit is secured.

Complicating matters further, the Division of Water Quality is blocking permits for the county to work at Seven Falls unless they pay “significant” fines assessed on Vinson for stormwater violations at Seven Falls.

“For us to do the work after paying the Corps of Engineers and Division of Water Quality, we’re going to have to cut the scope of the work (on infrastructure),” Burrell said, which opens the county up to a lawsuit by Seven Falls lot owners and lien holders.

By filing an “interpleader” action in federal court, Burrell said the county essentially puts decisions about how that money is spent in the hands of a judge.

“It basically says, ‘We have $6 million to spend on these things,’” he said. “These things total up more than $6 million. If we do it one way, we’re going to be subject to liability from one of these groups of defendants that we’ve sued. If we spend it another way, we’re subject to liability from another group. We don’t want to be subject to any liability from any of these groups. Tell us how to spend the money.”

Concerned about ongoing erosion and stream damage at Seven Falls, Commissioner Mike Edney asked, “Could the county be in a position to go into that lawsuit at a fairly early stage and get permission from the court to expend some funds to mitigate the environmental issues that we know are out there?”

Burrell said that’s what the county will seek from the court, if they’re forced into legal action. Asked by Chairman Charlie Messer what the timeline for fixing large gullies and washouts might be, Burrell said if the parties can reach an agreement, under the most optimistic scenario, they might begin work next spring.

<p>Caught in a legal quagmire, commissioners voted Wednesday to sue the U.S. Army Corps of Engineers, the N.C. Division of Water Quality and lot owners in the failed Seven Falls subdivision if the parties can't agree how the county should spend $6 million in bond proceeds. </p><p>The board authorized County Attorney Russ Burrell to invite the Corps, state DWQ officials and roughly 200 lot holders to a meeting in February, seeking an agreement on how the county should disburse $6 million it recovered from a performance bond forfeited by a developer. </p><p>“I won't say I'm particularly sanguine about the possibility of that happening, but it could happen and I hope it will,” Burrell said about an agreement.</p><p>If those negotiations fail to produce progress within about 30 days, the board agreed the county has no other option than to sue those parties to force a federal judge to mandate how the $6 million should be spent.</p><p>“It sounds like a very good approach and I think it's something we ought to pursue,” said Commissioner Grady Hawkins, referring to the carrot-and-stick approach of negotiation followed by legal action.</p><p>The county maintains the bond proceeds must be used to finish road, water and sewer infrastructure, along with associated erosion control, promised to lot owners by developer Keith Vinson. Burrell told the board that will likely cost more than $6 million at today's prices.</p><p>But the U.S. Army Corps of Engineers, which revoked Vinson's 2008 permits for altering streams and wetlands, wants the county to pay $800,000 in off-site stream work to mitigate damages. The Corps says the county can't proceed on any work at Seven Falls until it's paid and a new permit is secured.</p><p>Complicating matters further, the Division of Water Quality is blocking permits for the county to work at Seven Falls unless they pay “significant” fines assessed on Vinson for stormwater violations at Seven Falls. </p><p>“For us to do the work after paying the Corps of Engineers and Division of Water Quality, we're going to have to cut the scope of the work (on infrastructure),” Burrell said, which opens the county up to a lawsuit by Seven Falls lot owners and lien holders. </p><p>By filing an “interpleader” action in federal court, Burrell said the county essentially puts decisions about how that money is spent in the hands of a judge.</p><p>“It basically says, 'We have $6 million to spend on these things,'” he said. “These things total up more than $6 million. If we do it one way, we're going to be subject to liability from one of these groups of defendants that we've sued. If we spend it another way, we're subject to liability from another group. We don't want to be subject to any liability from any of these groups. Tell us how to spend the money.”</p><p>Concerned about ongoing erosion and stream damage at Seven Falls, Commissioner Mike Edney asked, “Could the county be in a position to go into that lawsuit at a fairly early stage and get permission from the court to expend some funds to mitigate the environmental issues that we know are out there?”</p><p>Burrell said that's what the county will seek from the court, if they're forced into legal action. Asked by Chairman Charlie Messer what the timeline for fixing large gullies and washouts might be, Burrell said if the parties can reach an agreement, under the most optimistic scenario, they might begin work next spring. </p><p>“If we go to court, I can't begin to give you a timeframe,” he said.</p><p>Reach Axtell at 828-694-7860 or than.axtell@blueridgenow.com.</p>